Oversubscribed Flynas IPO offers hope for other Saudi listings

• US tariffs, low oil prices taking a toll
• 6 Saudi IPOs so far this year
• 4 more approved

The Saudi budget airline Flynas announced that the retail tranche of its initial public offering (IPO) was oversubscribed four and a half times. 

The news offers hope for upcoming IPOs in the kingdom following a fall in the share price of United Carton Industries Company (UCIC) after it listed on the main market last week.

The airline, which is partly owned by billionaire Prince Alwaleed bin Talal, is selling 51.3 million shares, representing 30 percent of its stock, of which 10 million shares were offered to retail investors. 

The final offer price has been set at SAR80 implying a post-listing market capitalisation of SAR13.6 billion ($3.6 billion).

The offering, worth $1.1 billion, is the largest of six undertaken on the Saudi Exchange’s main market so far this year, which will have raised a combined total of $2.8 billion. 

Ibrahim Soumrany, a partner at law firm Gibson, Dunn and Crutcher in Riyadh, said that while some companies have chosen to delay their IPO plans by a few weeks, there is still momentum from those that intend to list. He is advising on several IPOs.

“Everyone’s acknowledging that it’s not a very easy market but I don’t think that anyone is taking the view that people are about to pull their IPOs,” he said.

“It also depends on how much you price your IPO; it’s a kind of balancing act.”

Four other companies also have Capital Markets Authority approval to pursue an IPO.

The most recent listing, that of packaging company UCIC, has received a poor response since listing on May 27.

Its share price has since fallen 15 percent.

A poor response on the first day of listing was compounded two days later following its first-quarter earnings announcement, when it reported a 46 percent drop in year-on-year net profit.

The knock-on effects of US tariff announcements in April and the subsequent drop in oil prices led the main market to fall to an 18-month low last week. This threatened to slow down new listings, although there are signs that companies are choosing to forge ahead.

Specialized Medical Centre (SMC), a hospital and clinic operator that has begun a $500 million IPO process, re-released its prospectus and a new timeline for its listing for last week. This was to address what it called a “late-stage disclosure update” in relation to SAR200 million of dividend payouts that is has since clawed back.

SMC told AGBI that the re-run of its book building process, which wrapped up on Thursday, attracted “strong institutional interest” but declined to comment on the subscription rate. 

The institutional tranche of the Flynas IPO, which ended on May 21, was oversubscribed by almost 100 times. Orders exceeding SAR409 billion were received from local and international investors.

For the retail tranche it attracted 666,069 investors and was oversubscribed 350 percent.

On Tuesday, the company reported a 0.7 percent drop in its first quarter net income to SAR148 million. That was despite a 6 percent increase in revenue to SAR1.8 billion, year-on-year.

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The airline operates 1,500 flights a week with an all-Airbus fleet, connecting more than 70 domestic and international destinations, according to its website.

Kingdom Holding has a 37 percent share in Flynas. Saudi Arabia’s Public Investment Fund holds a 17 percent stake. 

On Monday, a different company — Al-Modawat Specialized Medical Company — announced its intention to transition from the junior Nomu market to the main market.

However, it will be unable to make the jump for at least nine months since it has not yet been listed on the junior market for the two years required by the CMA before transition.